The huge rush to buy life insurance online  – at one point as high as 80 percent thanks to the public scandals that have damaged the industry’s credibility – have led to warnings.


The former Association of Financial Advisers chief executive Brad Fox says buying life insurance over the phone after answering a few questions is just plain dangerous.


“As is often the case in life, if it seems too good to be true, then it probably is,’’ he says.

Brad (who is now the chair of Tribeca Financial) represented financial advisers who charged substantial commissions on life insurance, and trailing commissions.


So no surprises for hearing him say: “Buying life insurance without a financial adviser might be faster upfront, but the sting is in the tail. It means the policy has not been underwritten and at claims time, consumers may well find out they were never covered.’’


But, like travel agents who say they iron out the details that can ruin a holiday, there is something in what he says.


Particularly since we have recently been treated to cases where hundreds of claims have been disallowed by banks like The Commonwealth.


He said that if the direct insurer determines that you had health issues back when you purchased the policy, or even in the years before, they may only refund the premium and not pay out.


“We think that is unconscionable,’’ Mr Fox said.


The AFA advocates that all life insurance be underwritten at application time.

The only way to reduce the risk of a policy not paying out at claims time is to see an adviser, he said.


“It will take longer to put the insurance in place because it is carefully underwritten in line with the client’s individual medical and family history before it is offered.’’


ASIC’s MoneySmart website advises consumers to buy life insurance in three ways:

From your super fund, insurance companies, insurance brokers or financial advisers.


“It is a good idea to shop around and compare policies based on the level of cover they provide, exclusions and value,’’ MoneySmart says.


Consumers should always find out if insurance companies cover any pre-existing medical conditions.


“You will need to disclose relevant details of your medical history to the insurance provider if you are asked. Failing to tell it like it is, could leave you with a worthless policy,’’ MoneySmart said.


Consumers can use the internet to do research but they should talk to an agent or insurance broker before buying an insurance, Termlife Insurance Saver advises.


If you are looking to purchase a life insurance policy or change your existing one, it is important that you find out as much information as possible about the types of cover out there and how appropriate they are for your age and lifestyle. 


Click here to see our quick guide on life insurance needs through different life stages.

Don’t Rush Buying Life Insurance Online 

Rushed decisions can usually end up with less desirable results. It’s the same with buying life insurance online. 


Getting life insurance is a decision that you should also discuss with your family, and sometimes even non-relatives such as your business partners. 


While crucial, it is still not ideal to rush through buying any type of life insurance because it involves making decisions about what will happen in case of unfortunate events such as sickness, disability, or death. 


Traditionally, you can obtain insurance directly from an insurer, through a financial advisor, or via your superannuation fund. 


But with the rise of comparison sites and robo-advisors, you can easily get an insurance quote based on your profile and even process the application without meeting an insurance agent. 

Common Myths About Buying Life Insurance Online


You probably think that the application for getting life insurance consumes a lot of time and involves complicated processes. This is not true. 


The myth-busting pointers below can help you understand the simplicity of buying life insurance online. 


1. “I purchased a policy five years ago. I think that’s enough.” 


Even though long-term planning is crucial in getting life insurance cover, a policy that you bought five years ago may not be suitable anymore to your current situation. 


That’s why it is ideal to reassess your insurance once every 12 months or if there’s a significant change in your life such as marriage, new babies, divorce, or retirement.


With available online platforms like Skype or Zoom, you can request a virtual meeting with your financial advisor to go over your plan. 


You may also take advantage of these platforms to update your insurance to accommodate your insurance needs and get that positive feeling brought by peace of mind. 


2. “It’s too much trouble getting the required medical exam.” 


Many life insurance policies such as term life insurance will require applicants to undergo a medical exam. 


The result of the exam will help the insurance company to evaluate your risk and set your life insurance premiums. 


If it is your first time to apply for life insurance, you may worry that you have to undergo a medical checkup, which could be challenging in this time of pandemic. 


But that may not be the case. 


Many insurance providers will not require an exam, especially if you are still young and you have no serious medical condition. 

3. “Online life insurance is a scam.”


While it is true that fraudulent life insurance schemes shocked Australians in recent years, it should not discourage you from seeking protection. 


You just need to be careful and always check and double check that the insurance company you are dealing with is duly authorised to operate in Australia. 


ASIC regulates insurance companies in Australia and you can even check the adviser’s register to make sure that your advisor is legitimate to sell insurance. 


Never rush buying life insurance. Always do your due diligence, perform background checks, and if the policy seems too good to be true, it probably is. 


4. I don’t trust insurance robo-advisors 


Just like in many parts of the world, the Internet has changed Australia in many ways. 


More and more Aussies are going online to talk to each other, express their opinions, find information, and even shop for insurance. 


Robo-advisors are now emerging in Australia because they can provide automated financial services. 


Still, many people find it difficult to trust automated financial guidance because they believe it lacks the human touch needed to understand personal circumstances and generate tailored advice. 


But you may take advantage of robo-advisors to expedite the process of comparing different life insurance products and then seek financial advice from a human advisor. 


With this simple strategy, you can save money and still benefit from the wisdom of a seasoned finance professional. 


5. “I hate filling out lengthy forms.” 


Probably you are thinking that you need to answer hundreds of questions about everything from your childhood years to what you usually eat during breakfast. 


But this is not true because the cost of insurance is only based on basic important  information about your life such as age, gender, work, and lifestyle. 


Many online insurance companies are also now using digital forms that automatically adjusts questions based on your previous responses. For example, if you are female, they won’t ask you about prostate cancer. 


You may not even need to fill in any forms at all. 


Even before the pandemic, many insurance companies were gradually transitioning into digital operations, so most will allow you to avoid paperwork. 


But take note that because of the pandemic, you may need to provide extra information such as if you have been in close proximity to someone who tested positive for Covid19 or if you have been in a country where certain variants of Covid19 were very high. 


How to Buy Life Insurance Online 


Companies transitioning into digital processes is arguably one of the positive effects of the pandemic. 


Insurance providers in Australia are now offering easy options online, which allow you to choose the most suitable options for you within the comforts of your home. 


Aside from the fact that the online application process has been drastically reduced, many digital platforms now make it easy to compare life insurance quotes and plans across different insurance brands. 


Some platforms even offer live support during the application stage for those who have immediate questions and prefer chatting with actual advisors instead of automated responses. 


For many insurance companies, completing an application follows the same traditional format. 


You need to answer several questions from different categories that may include your occupation, your health, your family’s health history, and your lifestyle. 


During the online process, the company will search other websites for information including driving records, online scripts you have received, and even exploring medical records to find any relevant data needed for your insurance. 


Take note that the insurance company can only do this if you have given your explicit permission. 


After data collection, all information will be processed for accelerated underwriting that uses an algorithm instead of a human underwriter. The process quickly computes the probability of someone getting sick or passing away from health issues or risky behaviour. 


Only a decade ago, the underwriting process used to take around 30 to 60 days. However, the algorithm is so advanced these days that it reduces the waiting periods. You can expect results in just a few minutes. 


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